Hotel sector revenue to improve 6%-7% in FY2018 : ICRA

Mumbai, June 1 -- http://thehoteltimes.in/images/2017/May/revenue-management-tips.jpg
* Muted supply pipeline to buffer the next up cycle
New Delhi, June 01, 2017: The revenue growth for the Indian Hotel Industry is expected to improve to 6%-7% in FY2018 even as the growth prospects have been scaled down from the earlier 8%-10%, constrained by the regulatory hurdles the industry is currently facing.
According to Subrata Ray, Sr. Group VP and Head - Corporate Ratings, ICRA Limited, "The muted supply pipeline across several markets coupled with robust demand uptick will be the driver for the next up cycle in the industry over the next five years. However, near term prospects will be constrained by regulatory hurdles the industry is currently facing, namely liquor ban in hotels closer to the highways and temporary challenges associated with the impending GST roll-out."
According to ICRA, revenue growth for the industry sample (of 12 large hotel companies) during Q4FY2017 remained subdued despite the pan India improvement in Revenue per Available Room (RevPAR). Despite the largely flat revenues, Q4 FY2017 operating margins improved by 80 bps aided by cost controls; operating margins for Q4 FY2017 stood at 22.0% (21.2% in Q4 FY2016). he largest players, The Indian Hotels Company Limited and EIH Limited posted marginal decline in top line, the latter bearing impact of closure of 'The Oberoi, New Delhi' for renovation.
In terms of pan-India average occupancy, the same grew by ~3% to 64% during FY2017 compared to 62% during FY2016, while Average Room Rates (ARR) stood at ~Rs. 5,700 during FY2017. Aided by upturn in occupancies and ARR traction in several markets, RevPAR for FY2017 increased by ~5-5.5%. RevPAR has been growing on a y-o-y basis for the past 11 quarters, indicating bottoming out of the industry. Despite the continued occupancy traction and the marginal improvement in ARRs, a healthier traction in ARR is necessary over the coming quarters to generate adequate returns considering the significant capital investments done by the industry.
The foreign tourist arrivals (FTA) growth to India picked up strongly to 10.8% during CY2016 compared to the muted 4.5% growth during CY2015; arrivals into India during the period was higher than the 8% international tourist arrivals (ITA) growth in the Asia-Pacific region. The growth has been stronger at 15.4% on Y-o-Y basis during year to date (YTD) April CY2017. FTA under the e-TV scheme accounted for 12.1% of total FTA into India during CY2016 and 16.1% for YTD CY April 2017, compared to 5.6% of total FTA into India in CY2015.
As against expectations of a 7% supply growth in FY2017, supply growth in the premium hotel segment was weaker at 5%-5.5%, on account of some delays/deferments in under-construction projects. The supply growth pipeline in the Indian premium hotel segment is likely to be muted at 5% incremental supply CAGR during FY17-20 as compared to the 17% growth during the supply peaks of FY10-13 and a softer 7% during FY13-16.
Published by HT Digital Content Services with permission from The Hotel Times.